Veteran Disability Pay and Spousal Support

The US Supreme Court Rules on Veteran Disability and Spousal Support

The Supreme Court Decides Unanimously on Veteran’s Disability Pay and Spousal Support

On May 15th, 2017, the US Supreme Court handed down a decision on the hot topic of military retirement pay, veterans’ disability pay, and spousal support.

The Supreme Court unanimously decided that state courts cannot order veterans to pay divorced spouses a portion of their military retirement benefits when those retirement benefits have been waived in favor of disability pay.

The Supreme Court’s Ruling

The Supreme Court ruled in favor of veteran John Howell who believed he did not owe his ex-wife 50% of the disability pay he had been receiving since 2005 from the Department of Veterans Affairs (VA).

The Case

The Arizona Superior Court awarded Sandra half of John’s military retirement pay in accordance with the Uniformed Services Former Spouses’ Protection Act.

In 2005, the VA diagnosed John with a service-related degenerative joint disease which rendered him 20% disabled and therefore entitled him to veterans’ disability compensation. This money is tax free, but must be substituted out by an equal amount of the military retirement pay (which is taxed).

John decided to waive $250 of his $1500 a month military retirement pay.

His decision reduced Sandra’s monthly spousal support by $125 (50% of $250, based on the 50-50 1991 divorce settlement). So she sued him in 2013.

The Arizona Superior Court agreed with Sandra that she was still entitled to half of what John’s retirement pay was before his decision to waive part of it in favor of disability pay.

John brought the case to the Supreme Court which overturned the state court’s ruling.

The Precedent

The Supreme Court recalled its previous decision in Mansell v. Mansell (1989) which held two pivotal concepts:

1) The Uniformed Services Former Spouses’ Protection Act, which authorizes state courts to treat as community property “disposable retired or retainer pay,” specifically defines such pay “to exclude any military retirement pay waived in favor of veteran disability benefits”;

and

2) the same Act does not grant “state courts the power to treat as property divisible upon divorce military retirement pay waived by the retiree in order to receive veterans’ disability benefits.”

The Implications

The implications of the Supreme Court’s ruling in Howell v. Howell are at least twofold, touching on spousal support on one hand, and on veterans’ pay on the other hand.

Regarding spousal support, this ruling clarifies that VA disability pay cannot be considered community property and cannot be divided as such, regardless of the effects on former spouses.

The ruling is likely to affect mostly former spouses of veterans with 10% to 50% disability ratings. These former spouses could see their spousal support reduced by up to 50%.

Military retirees with over 50% disability ratings receive both 100% military retirement pay and concurrent VA disability pay, so their former spouses will still receive the same amount of spousal support.

Regarding veterans’ pay, the ruling reinforces the concept that tax-free VA disability pay cannot concur with taxed military retirement pay, requiring retirees with a disability rating between 10% and 50% to trade off an amount of retirement pay for an equal amount of disability pay (a practice known as “the offset”). This prompts a consideration about the rationale and purpose of each pay.

Military retirement pay could be considered compensation for a career of military service; VA disability pay could be considered compensation intended to fill the “earning gap” caused by the disability – a sort of “indemnity” for the pay loss that veterans may take due to their disability.

Following this interpretation, the two pays would serve two different purposes that are complementary, not mutually exclusive. Based on this premise, the Military Officers’ Association of America (a non-profit organization that supports veterans and active-duty military) argues that Congress should allow full concurrent receipt of both retirement and disability pay, regardless of the disability rating.

The division of military retirement benefits is a huge issue for all career military members going through divorce, and their dependent spouses.

It sounds like the topic is still hot even after this Supreme Court’s decision.

We are likely to see more on this.

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